With first drug on the market, Arcutis forks over $16M cash for a buyout

2022-09-08

First in Class

Having scored their first FDA approval, the dermatology specialists at Arcutis have pounced on a new buyout to beef up the pipeline. Arcutis is acquiring Ducentis BioTherapeutics in a hybrid deal comprising $16 million in cash and roughly $14 million in stock — plus an undisclosed sum of milestone payments. According to Ducentis investor LifeArc, the deal values Ducentis at about $400 million. The crown jewel here is Ducentis’ lead preclinical compound, DS-234, a fusion protein and agonist of the CD200 receptor, which is believed to be an immunological checkpoint. By driving up the activity of CD200R, Arcutis hopes that the drug can suppress unwanted overactive immune responses, thereby dampening inflammation in diseases like atopic dermatitis. Importantly, Arcutis noted it may be complementary to Zoryve, its roflumilast cream, in atopic dermatitis. Zoryve is currently in late-stage trials for this indication. CEO Frank Watanabe calls it a “modest investment” for a high-value indication. Frazier Healthcare Partners started putting the company together around 2016, originally on the idea that it could take existing compounds against well-established targets and make reformulations — mostly topical ones — that can hit a sweet spot within the often-crowded dermatology spaces. Specifically in the lead indication of plaque psoriasis, it hoped to offer an alternative to steroids for the vast population of patients unreached by biologics. That strategy led it to positive Phase III readouts and an FDA approval for Zoryve two months ago, whose active ingredient is the PDE4 inhibitor PDE4 inhibitor roflumilast, licensed from AstraZeneca. But its commercial value remains to be determined as Arcutis only launched the drug in August. There are two other programs in the pipeline that came from a collaboration with China’s Jiangsu Hengrui. With DS-234 and its checkpoint agonism thesis lending to future applications in autoimmune diseases, however, Arcutis would be moving into the biologics arena — something that Watanabe said his clinical, manufacturing and commercial teams all have experience with. And he noted the drug still falls squarely under Arcutis’ first-in-class ambitions. Ducentis CSO Rebecca Ashfield will work with Arcutis as a consultant to oversee the transfer as well as lead future technical and manufacturing operations. Arcutis recently reported cash, cash equivalents, restricted cash, and marketable securities of about $283 million as of June 30. It also raised $162 million in equity financing and drew $125 million from a loan facility to foot the bill on the Zoryve launch as well as R&D.

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